LIC’s remarkable performance in the third quarter of the 2023–2024 fiscal year has garnered market attention. On February 8, LIC’s market capitalisation surged above ₹7 lakh crore for the first time and the share skyrocketed over 4%, thanks to the impressive quarterly statistics.
By achieving this mark, LIC surpassed industry titans like ICICI Bank and Infosys to rank as the fourth most valued firm in India. We will explore the reasons behind LIC Q3 results 2023 in this blog, as well as the implications for the organisation and its stakeholders.
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LIC Q3 results 2023
- Profit after tax (PAT): For the quarter that concluded on December 31, LIC had a strong financial performance. The company’s profit after tax increased to ₹9,444 crore, a substantial rise from the ₹6,334 crore it made during the same time the previous year.
- Premium income: The overall premium income of the company increased by 5.4% to ₹1.17 lakh crore. This rise indicates ongoing customer loyalty and new policy purchases, even though it is less than some forecasts.
- Annual premium equivalent (APE) growth: A solid upward trajectory in premium income is indicated by the company’s 14% year-over-year growth in APE, which included major spikes of 31% in December 2023 and 14% in January 2024.
- Value of new business (VNB): The VNB, which gauges the financial success of new initiatives, increased 7.4% to ₹1,641 crore. Even though this growth was slight and less than some analysts had predicted, it nevertheless shows encouraging progress.
- Investment income: The profits for the quarter climbed by 12% year over year to ₹95,266.8 crore, which was mostly attributed to LIC’s income from investments.
- Interim dividend: A ₹4 interim dividend per share was announced, with February 21, being the record date.
- Product launches: The introduction of two new non-par and one ULIP products in the preceding quarter undoubtedly contributed to this heightened growth, with an increasing share of non-par products potentially improving profit margins.
- Assets under management (AUM): In December 2023, LIC’s AUM increased significantly to ₹49.66 lakh crore. This represents a growth of 11.98% year over year and demonstrates the company’s robust asset building and financial management skills.
- Operational efficiency: Even with a 32% annual increase in management costs, LIC was still able to retain its operational effectiveness. This is a testament to the company’s effective cost-management strategies and operational practices.
- Gross non-performing assets (NPA): LIC reduced its gross non-performing assets (NPAs) to 2.15%, demonstrating an improvement in operational efficiency despite obstacles, including a 32% increase in management expenses.
- Strategic fund transfer: LIC reported the transfer of ₹7,692 crore from its non-participating fund to the shareholders’ fund for the quarter, an increase from ₹5,670 crore transferred in the corresponding quarter last year.
- Solvency ratio: The solvency ratio increased to 1.93 from 1.85 times the previous year.
Why has LIC market valuation increased?
LIC has surpassed industry heavyweights like ICICI Bank and Infosys to rank as the nation’s fourth most-valued company. With this new status, LIC is only behind HDFC Bank, TCS, and RIL in terms of value.
It’s important to note that LIC’s share value has now surpassed that of its nearest rivals in the insurance industry, which include ICICI Prudential Life Insurance, SBI Life, and HDFC Life.
How did the slow-moving elephant end up leading the market? Aside from the outstanding LIC Q3 profit, these are the reasons.
Strategic investment returns
The rising market valuation of LIC can be attributed to its strategic investments, which have produced significant returns, especially in critical sectors and large Indian enterprises. The company’s ability to make profitable investments is demonstrated by their CY23 portfolio profit of ₹2.3 lakh crore.
According to IRDAI, LIC continues to dominate the Indian life insurance industry, with a dominant market share of 58.90% in first-year premium income. LIC’s market share remained excellent at 72.24% in group business and 38.74% in individual business as of December 31, 2023. With a strong market share in both the individual and group business LIC has solidified its leadership in the asset management and insurance sectors.
IPO momentum and public confidence
A major factor in LIC’s present market position was the company’s successful May 2022 IPO. The company showed its innate power and tenacity by overcoming volatility and bad market sentiment despite early post-IPO hurdles.
Government and market support
The strong inflows from Foreign Portfolio Investors (FPIs) and the endorsement from Prime Minister Narendra Modi have also contributed significantly to the growth in LIC’s valuation. These elements, along with LIC’s market investments and strategic diversification, have driven up the company’s worth and allowed it to overtake significant rivals like Infosys and ICICI Bank.
- Integrated insurance platform: With the goal of giving clients a seamless insurance experience, LIC intends to work with others to develop an extensive electronic platform for life, health, and general insurance. A proposal to invest up to 8.3% of the business’s share capital in the platform management company during its initial phase has been accepted by the board.
- Sustained profitability: Maintaining high-profit margins while navigating rising costs and market competition is still crucial to LIC’s long-term profitability and financial viability.
- Growth in new business: Increasing policy sales across a variety of categories and improving client acquisition techniques are essential for driving up the New Business Value (NBV) and guaranteeing sustained growth.
- Stakeholder value creation: A commitment to actions that are value-accretive to all stakeholders, focusing on a targeted product and channel mix, with the support of employees, agency force, and channel partners.
- Product development and digital transformation: LIC is dedicated to consistently creating cutting-edge products that meet changing consumer demands. LIC is in the process of digitally transforming its business operations with the goal of substantially improving productivity and customer service.
The rise of LIC market valuation is a testament to its strong financial results and strategic goals. LIC is positioned for sustained growth as it embraces innovation and broadens its digital presence, solidifying its crucial position in India’s financial industry and providing encouraging opportunities for investors and policyholders.